How Low Can You Go?

The real estate market is changing in ways not seen since 2008-09, but what does that mean for investors? Join Peter Kerr, CFA, as he sits down with Adil Hasan, Associate Director of Real Estate, to discuss the low-interest-rate environment and what it could mean for today’s market, especially real estate. The past six-plus months have been marked by a heated real estate market, higher inflation, low-interest rates, and increased market volatility. Where might it go from here?

Key Takeaways:

[2:29] The difference between single asset CMBS and the main focus at Yieldstreet.

[5:06] Yieldstreet’s evolution from bridge lending to higher-yielding lending opportunities.

[7:34] How capital structure works based on the risk assumed by investors.

[9:30] Bridge loans, construction loans, and the life cycle of a CRE loan.

[14:14] Key differences between private and public loan markets.

[15:38] The positive and negative impact of low-interest rates on the real estate market.

[18:03] The evolution of the CRE equity platform at Yieldstreet.

[23:00] Fundamentals and metrics when evaluating potential returns.

[26:55] Rent or own — the demand for each and the effect COVID-19 has had on both.

[30:50] How to know if you’re paying an appropriate price for an investment.

[32:04] Current trends in the real estate market.

[32:54] A look at Adil’s real estate career footsteps.

[35:10] What might be coming up next in the real estate asset class.

Yieldstreet originally focused on bridge lending but has evolved to include other types of lending throughout the real estate life cycle. Adil recounts this evolution and the higher risk, higher potential for reward investments that Yieldstreet offers now. He also details the ins and outs of how multilevel capital structure works based on the various levels of risk assumed by investors. As Adil puts it, this growth in the opportunities that are now available at Yieldstreet is very exciting because investors can “look at a deal and choose the challenge that they want to be in.”

For anyone who has ever wondered about the life cycle of a commercial real estate asset, Adil walks listeners through traditional loans, bridge loans, construction loans, and what might prompt someone to take out a higher rate loan. There are also key characteristics of both the private and public loan markets that can make a substantial difference in the accessibility and ease of acquiring either.

Interest rates are at historic lows right now, and there are positive and negative impacts of these low-interest rates on the real estate market. On the one hand, because rates are so low, investors are buying up assets in this hot market. But on the other hand, investors are also faced with the extremely fierce competition when bidding on more limited CRE inventory.

Yieldstreet has had a relatively conservative entrance into the CRE space. From the original $2.5 million Michigan deal to the more recent $20 million Chesapeake Virginia industrial offering, we are expanding our offerings every day. Adil defines the various fundamentals and metrics that are used here at Yieldstreet to evaluate and model out potential future returns for deals for both debt and equity investment opportunities. Criteria include the CAP rates, the asset types, demographics, employment base, industrial growth, and other expected growth, or contraction, factors in the market. All of these factors combined help to determine whether the investment is a potentially attractively yielding one.

To wrap up this insightful conversation, Adil shares his thoughts on why he believes that real estate is one of the hottest markets to invest in right now. There are essentially three primary options for residential real estate — own a home, rent a home, or rent within a multi-family residence — and all three of these options are experiencing a notable shortage along with higher demand as a result of the pandemic-related migration from major U.S. cities. An increase in e-commerce has also increased the demand for industrial real estate. Finally, as the world continues to open back up, the real estate market continues to heat up.
But how can investors capitalize on this market with confidence that the prices they’re paying now will bring a satisfying ROI in the future? For that answer and more insights into where the real estate market might be headed next, you won’t want to miss out on this episode of The Yield.

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